By Marc Gilman
(800) 927-9326 |
Long-term care is one of the few major financial risks most people never actually sit down and evaluate for themselves. Health insurance, home insurance, even life insurance — those get reviewed periodically. Long-term care risk usually doesn’t get looked at until a health event forces the conversation, often at the worst possible time to start planning.
The risk itself isn’t abstract. Roughly 56% of adults who turned 65 between 2021 and 2025 are expected to need long-term services and supports at some point in their lives, according to Department of Health and Human Services data — and the cost of that care has climbed sharply in recent years, well ahead of both general inflation and the income growth of retirees themselves. But “the average person’s risk” isn’t the number that matters. What matters is your risk, based on your health, your family, your assets, and your own tolerance for financial uncertainty later in life.
Below are the questions worth asking yourself — honestly — before deciding how, or whether, to protect against this risk financially.
Key Takeaways
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Long-term care risk is highly individual — national averages don’t tell you much about your own exposure.
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Long-term care costs have outpaced both inflation and retiree income growth in recent years, and vary significantly by state.
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The plan many people default to — “I’ll spend down and qualify for Medicaid” — is far less realistic for most asset holders than it sounds.
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There’s more than one way to fund this risk — traditional LTC insurance, hybrid life/LTC or annuity/LTC products, and self-funding are all legitimate strategies depending on your situation.
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Waiting to answer these questions doesn’t reduce the risk — it typically narrows your options and raises the cost of the ones that remain.
How Likely Are You, Personally, to Need Long-Term Care?
National statistics on long-term care usage are a starting point, not a personal forecast. Your actual likelihood of needing care — and for how long — depends heavily on factors like your current health, your family’s health history, and whether close relatives have needed extended care themselves.
It’s worth reframing this question the way retirement researchers increasingly do: long-term care is best understood as an insurable risk, not a certainty everyone should simply expect and save for individually. Most people’s care needs turn out to be modest — often covered in part by Medicare’s limited skilled-nursing benefit, with manageable costs the rest of the way. A smaller group faces a genuinely catastrophic need, sometimes stretching a decade or more, with a financial impact severe enough to threaten a spouse’s security or an entire intended inheritance. That unevenness — many modest risks, a few catastrophic ones — is exactly the kind of risk insurance products are built to pool and transfer, which is worth keeping in mind before assuming self-funding is automatically the safer choice.
It’s also worth being specific about your own health rather than relying on a general impression of it. Chronic conditions affecting mobility or cognition are the more common paths into a long-term care need, and a family history of conditions like Alzheimer’s, Parkinson’s, or stroke is a meaningful data point — not a certainty, but a reason to take the planning more seriously rather than less. The National Institute on Aging notes that a long-term care need can arise suddenly, following an event like a stroke or heart attack, or develop gradually as a chronic condition progresses — both are worth planning around, not just the sudden version.
What Would Long-Term Care Actually Cost You?
Most long-term care needs are triggered by an inability to perform a set number of Activities of Daily Living (ADLs) — typically bathing, dressing, toileting, transferring, continence, and eating — or by a cognitive impairment requiring supervision. Care is delivered in a range of settings: at home by family or paid caregivers, in community settings like adult day programs, or in residential facilities such as assisted living or skilled nursing homes.
Cost varies enormously by setting and by region, and it has been rising quickly. Home care costs alone rose nearly 40% between 2021 and 2026 — well ahead of general inflation — and the median annual cost of 30 hours per week of home care now runs above $50,000, more than double the average annual Social Security benefit. Nationally, costs range from roughly $26,000 a year for adult day services to well over $100,000 a year for a private nursing home room. Geography matters too: costs in the most expensive states can run close to double what they are in the least expensive ones, so it’s worth looking at current costs specific to where you live, or where you’d realistically want to receive care, rather than relying on a single national average.
Who Would Provide Your Care, and What Would That Cost Them?
A question that’s easy to skip: if you needed care, who would actually provide it? For many people, the honest answer is an adult child or a spouse — and informal caregiving has its own very real costs, in lost income, retirement savings, and physical and emotional strain on the caregiver. As long-term care becomes less affordable, more of that burden shifts onto family members who often take on far more than they realistically have the time or resources to handle.
If your current plan is “my daughter will take care of me,” it’s worth having that conversation directly with her, rather than assuming it. What looks like a free option on paper often isn’t free at all — it’s a cost that’s simply been shifted onto someone else’s time and finances instead of yours. This is also a good moment to think through who would make medical and financial decisions on your behalf if you couldn’t make them yourself — a related but separate question from who provides hands-on care, and one worth settling through a health care directive and power of attorney while you’re still able to make that choice. These don’t have to name the same person for both roles.
How Much of This Risk Could You Absorb Out of Pocket?
This is really a question about your total financial picture, not just your savings account. If a multi-year care need arose tomorrow, could your assets absorb that cost without meaningfully changing your spouse’s financial security, your ability to leave anything to your children, or your own quality of care?
Self-funding is a legitimate strategy for some people — particularly those with substantial liquid assets who are comfortable treating long-term care as one of several risks their portfolio needs to withstand. But it’s worth being honest about what “self-funding” actually tends to mean in practice. Research from the Center for Retirement Research at Boston College found a striking gap between what people expect to do and what they actually end up doing: among people with $100,000 or more in investable assets, roughly 60% say they’d plan to spend down their assets to qualify for Medicaid if they couldn’t afford care — but in reality, only about 15% of people starting with that level of assets ever actually end up on Medicaid. The reason is straightforward: Medicaid’s income and asset limits are tight enough that most people with meaningful retirement income and savings simply don’t qualify, even after a real spend-down. Long-term care insurance, meanwhile, is genuinely underused — only about 3% of all U.S. adults, and 15% of those 65 and older, carry it.
The same research found the opposite pattern for other fallback options: people are far less enthusiastic, on paper, about tapping home equity or moving in with family — yet in practice, more than 40% of retirees do end up tapping home equity, whether through a second mortgage, a home equity line of credit, or downsizing. It’s worth thinking through which of these options you’d genuinely be willing to use, rather than assuming your stated preference today matches what you’d actually do if the need arose.
There’s also a quieter cost to under-planning worth naming directly: research presented at a recent Morningstar retirement conference found that even retirees who could comfortably self-fund a long-term care event still spend more cautiously than they need to, simply because of the looming uncertainty of a potential large, late-life expense. Having an actual plan in place — insurance or a clearly modeled self-funding strategy — can address that anxiety directly, not just the underlying financial risk.
What Financial Tools Exist to Transfer This Risk?
If self-funding the entire risk isn’t realistic or desirable, there are several ways to transfer some or all of it to an insurance company:
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Traditional long-term care insurance pays a defined daily or monthly benefit once you qualify for a claim, in exchange for a premium. These are pure risk-transfer contracts — if you never need care, the premiums aren’t refunded, similar to how auto or term life insurance works. Premiums are also not guaranteed to stay level; insurers can and do request rate increases over time. For business owners and self-employed professionals, though, a portion of traditional LTC premiums can be tax-deductible as a medical expense, subject to age-based IRS limits, which can meaningfully change the math.
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Hybrid life insurance with a long-term care rider combines a death benefit with the ability to accelerate some or all of that benefit to pay for qualifying long-term care expenses. If long-term care is never needed — or only partially used — the unused benefit is simply added back into a tax-free death benefit paid to your beneficiaries. This structure directly addresses the “what if I pay for insurance I never use” concern that keeps many people from buying traditional LTC coverage, and it typically comes with guaranteed level premiums since it’s built on a permanent life insurance chassis.
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Annuities with a long-term care rider work similarly, using an annuity’s cash value to fund an enhanced payout if long-term care is needed.
Each of these has different underwriting requirements, cost structures, and tax treatment, and none is universally the “right” choice — the right fit depends on your age, health, existing coverage, and whether preserving a death benefit or an annuity payout matters to you independent of the long-term care question.
Does Your Family History or Health Change the Calculus?
It’s worth revisiting the health and family history questions from earlier with a specific lens: underwriting, and timing. Long-term care coverage — traditional or hybrid — becomes harder and more expensive to obtain the longer you wait, and certain health conditions can disqualify an applicant entirely. Waiting even five years to apply can increase the annual premium for the same coverage by 20% to 40%, purely due to age-based pricing — well before accounting for any change in health. If you have any conditions insurers commonly flag during underwriting, or a family history that concerns you, that’s a reason to have this conversation sooner rather than later, since your options may narrow with time in a way that’s outside your control.
When Is the Right Time to Act?
There’s no single “right age” to address long-term care risk, but there is a clear pattern: premiums are lower and underwriting is easier the younger and healthier you are when you apply, the cost of care itself keeps climbing every year you wait, and the range of available options — traditional, hybrid, or self-funding paired with other planning — is widest before a health event forces the decision. Waiting doesn’t eliminate the risk; it typically just narrows which of these tools remain available to you and raises what they cost.
Where Does Insurance Planning Fit In?
None of these questions has a universal right answer — the honest answer for you depends on your health, your family, your assets, and how much uncertainty you’re willing to carry into retirement. What insurance planning can do is turn these questions into a concrete comparison: what would self-funding actually look like against your specific asset base, versus what a traditional, hybrid, or annuity-based LTC strategy would cost and cover, given your current health and family history.
What To Do Next
If working through these questions has raised more questions than it’s answered, that’s a normal part of the process — long-term care planning touches health, family, and finances all at once, and it deserves a conversation rather than a snap decision. If you’re also looking for general information on care services available in your area, the federally run Eldercare Locator (800-677-1116, eldercare.acl.gov) is a free, non-commercial resource worth knowing about.
Contact Gilman Agency at (800) 927-9326 or to talk through your specific situation and what long-term care protection options make sense for you.
Sources: This article draws on data from the AARP Public Policy Institute’s 2026 report on long-term care affordability; research from the Center for Retirement Research at Boston College on households’ long-term care contingency planning; commentary from a 2026 Morningstar Investment Conference panel on retirement risk; the National Institute on Aging’s public guidance on long-term care; and general provisions governing long-term care insurance, hybrid life/LTC, and annuity/LTC rider products, including IRS rules on the deductibility of LTC premiums. Individual product terms, underwriting requirements, and costs vary by carrier and by state; this article is not a substitute for a personalized review of your own health, financial situation, and available coverage.
This article is for general informational purposes only and does not constitute tax, legal, or financial advice. Insurance products and their features vary by state and carrier. Consult a licensed insurance professional and a qualified financial or tax advisor before making decisions about long-term care planning.
